AT&T laying groundwork for possible takeover of Vodafone in the new year
Executives at US phone company AT&T are laying the groundwork internally for a potential takeover of Vodafone next year, mapping out a strategy for a complex deal with Europe's biggest mobile carrier, sources said.
While the companies have not entered formal negotiations, the biggest US phone firm is intensifying work on which Vodafone assets it would retain after a deal and who could buy others, the sources added. AT&T is also formulating a strategy for Vodafone's operations in Europe.
A merger, which would create the world's biggest telecoms operator by sales, would not be AT&T's first attempt at combining the companies.
AT&T approached Verizon Communications this year about a transaction in which it would buy Vodafone's European operations, with Verizon taking over their wireless joint-venture and America Movil SAB taking much of the rest.
Verizon rejected that approach as too complex and likely to slow its own $130bn (€96bn) purchase of Vodafone's 45pc stake in Verizon Wireless, the sources added.
"Buying Vodafone seems like an easy decision for AT&T," said Walt Piecyk, an analyst with BTIG in New York. Still, while Europe might offer some expansion opportunities, AT&T cannot afford to take its eye off the US market, where competition is heating up, he added.
Combined, Vodafone and AT&T would be a globe-spanning telecoms player with a market capitalisation exceeding $250bn.
With more than 500 million wireless subscribers worldwide, the company would be able to challenge Google and Apple when negotiating handset subsidies and wringing profit out of nascent technologies such as mobile advertising.
Any transaction would have to await the conclusion of Vodafone's sale of its Verizon Wireless stake, which the companies expect to close in early 2014. AT&T may ultimately decide not to proceed with a bid, the sources said.